Enbridge Inc. — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023; the filing also reports fourth-quarter results. Unless stated otherwise, figures are in Canadian dollars. Enbridge is a North American energy infrastructure company spanning liquids pipelines, gas transmission and midstream, gas distribution and storage, renewable power, and energy services.
Financial performance
| Metric | 2023 | 2022 | Change / context |
|---|---|---|---|
| Operating revenue | $43.649 billion | $53.309 billion | Down 18.1%, chiefly reflecting lower commodity sales and gas distribution sales; commodity costs largely pass through. |
| Operating income | $8.651 billion | $5.178 billion | Up 67.1%; 2022 included a $2.465 billion goodwill impairment. |
| Earnings attributable to common shareholders | $5.839 billion | $2.589 billion | Up 125.5%; year-over-year comparison is affected by impairments, derivative revaluations and other unusual items. |
| Diluted earnings per share | $2.84 | $1.28 | Reported earnings improved substantially; results include significant non-cash and non-operating effects. |
| EBITDA | $16.304 billion | $12.038 billion | Up 35.4%; non-GAAP measure, and the comparison is affected by the 2022 goodwill impairment. |
| Cash from operating activities | $14.201 billion | $11.230 billion | Up 26.5%. |
| Capital expenditures | $4.654 billion | $4.647 billion | Broadly unchanged. |
| Interest expense | $3.812 billion | $3.179 billion | Higher, primarily due to higher interest rates and average debt. |
| Total debt | $81.199 billion | $80.980 billion | Year-end debt balance; reported long-term debt was $74.715 billion, with $6.084 billion current maturities and $0.400 billion short-term borrowings. |
| Cash and cash equivalents | $5.901 billion | $0.861 billion | Higher largely because of pre-funding for the planned utility acquisitions. |
| Net available liquidity | $23.0 billion | $10.0 billion | Includes $17.1 billion of available credit facilities and $5.9 billion of unrestricted cash. |
| Common dividends paid | $7.276 billion | $6.968 billion | Quarterly dividend raised 3.1% to $0.915 per share, or $3.66 annualized, effective March 2024. |
Margins: The filing does not present a standardized operating-margin measure. Calculated from reported figures, operating margin was approximately 19.8% in 2023 versus 9.7% in 2022; interpret this alongside the material impairment and derivative effects.
Fourth quarter: Revenue was $11.298 billion versus $13.424 billion in Q4 2022. Operating income was $1.845 billion versus an operating loss of $540 million; common-shareholder earnings were $1.726 billion versus a loss of $1.067 billion. Q4 diluted EPS was $0.81 versus a loss of $0.53.
Material changes versus 2022
- Liquids Pipelines EBITDA rose to $9.499 billion from $8.364 billion, supported by higher Mainline volumes and increased ownership of Gray Oak and Cactus II, partly offset by lower interim tolls and higher power costs.
- Gas Transmission and Midstream EBITDA increased to $4.264 billion from $3.126 billion. The comparison reflects the absence of the $2.465 billion goodwill impairment recorded in 2022; underlying 2023 results also faced lower DCP/Aux Sable commodity contributions and higher costs.
- Gas Distribution and Storage EBITDA declined to $1.592 billion from $1.827 billion. A $281 million impairment followed the Ontario Energy Board’s Phase 1 decision; warmer-than-normal weather also reduced 2023 EBITDA by about $86 million year over year.
- Renewable Power Generation EBITDA fell to $149 million from $262 million, including a $261 million Chapman Ranch wind impairment; weaker wind resources and lower European power prices also weighed on results.
- Energy Services’ EBITDA loss narrowed to $37 million from $417 million, helped by the expiration of less attractive transportation commitments and improved margins.
- Operating cash flow increased, while working-capital movements contributed $2.311 billion in 2023 versus a $12 million use in 2022.
Outlook, capital allocation and notable items
- Management emphasized stable, contract- and regulation-supported cash flows, operational reliability, disciplined investment, and maintaining investment-grade credit ratings. It cited a commercially secured capital program of approximately $24 billion through 2028; no specific consolidated earnings or cash-flow guidance is provided in the supplied filing text.
- Three Dominion Energy gas utilities were under agreements for an aggregate purchase price of $19.1 billion (US$14.0 billion), including assumed debt. Closing was expected in 2024, subject to approvals and other conditions. Enbridge issued $4.6 billion of common shares and raised debt to help fund the transactions.
- Enbridge agreed to sell its interests in Alliance Pipeline and Aux Sable for $3.1 billion, including approximately $0.3 billion of non-recourse debt; closing was expected in the first half of 2024. Proceeds were intended to help fund the utility acquisitions and reduce debt.
- The Mainline Tolling Settlement runs through the end of 2028, with revised interim tolls effective July 1, 2023; CER approval remained pending at filing. Management expected financial results broadly in line with prior results after considering the provision, inflationary adjustments and higher volumes.
- The Ontario Energy Board’s Phase 1 decision reduced Enbridge Gas’s 2024 capital plan by $250 million, required certain capitalized overhead to be expensed, changed small-customer connection cost recovery, and disallowed recovery of specified balances. The resulting $281 million impairment was recognized in 2023. Enbridge Gas appealed and sought OEB review; outcomes were uncertain.
- Other unusual items included a $1.127 billion pre-tax unrealized derivative gain in 2023 versus a $1.246 billion loss in 2022, and a $638 million realized loss from terminating Canadian Mainline foreign-exchange hedges. These effects created significant reported-earnings volatility.
- Key risks include pipeline incidents and outages, extreme weather, cybersecurity, regulatory and permitting delays, energy-transition policy and demand changes, commodity and interest-rate exposure, access to capital, and acquisition execution. Line 5 litigation includes a court order requiring cessation of operation on certain Bad River parcels by June 2026 absent valid rights; appeals were pending. The Dakota Access Pipeline environmental review also continued.
- Management and the independent auditor reported effective internal control over financial reporting; the auditor issued an unqualified opinion on the financial statements and controls. The filing cover indicates the statements reflect correction of an error, but the supplied filing text does not clearly identify the correction’s nature or quantify its effect.
Important facts for investors to verify
- Whether the gas utility acquisitions and the Alliance/Aux Sable sale closed on expected terms and how their final funding affects debt and interest expense.
- The CER’s decision on the Mainline settlement and the final revenue and cash-flow effects of toll adjustments.
- The outcome and financial implications of Enbridge Gas’s OEB appeal and review requests, including future rate recovery and capital spending.
- Underlying cash-flow and distributable-cash-flow trends excluding derivative fair-value swings and other unusual items; EBITDA is a non-GAAP measure.
- Debt maturities, ratings, covenant headroom and dividend coverage after acquisition funding; debt and liquidity figures above are at December 31, 2023.
- The specific correction of error indicated on the filing cover and whether any additional disclosure or amendment explains it.